Tech giant Apple (AAPL +0.17%) started 2015 off with a bang.
After reporting the most lucrative quarterly performance in U.S. corporate history, Apple shares have positively soared thus far year-to-date.
And as it prepares to wrap its current fiscal second quarter, recent commentary from some of the most respected analysts on Wall Street indicates Apple's money machine remains in high gear as it heads toward its upcoming quarterly report next month.
More records ahead for Apple
According to Morgan Stanley's well-respected research analyst Katy Huberty, Apple is on track to sell an impressive 54 million iPhones in its soon-to-be-completed fiscal second quarter. For context, this would represent an impressive 23.5% increase over Apple's iPhone sales from the same quarter a year ago, and establish a fresh Q2 iPhone sales record for Apple.
Here's how that 54 million estimate would compare against Apple's past FY Q2 performances.
Source: Apple investors relations, Morgan Stanley.
This estimate comes from Morgan Stanley's proprietary AlphaWise Smartphone Tracker, which analyzes global web search traffic to arrive at its iPhone sales estimate. In terms of its overall veracity, Morgan Stanley's AlphaWise Tracker has proven to be a reasonably, but certainly not perfect, predictor of Apple's quarterly iPhone sales. It's also worth noting the 54 million iPhone estimate reflects the average Wall Street estimate for Apple's upcoming quarter. A quick glance shows Barclays also calling for 54 million iPhone shipments, while UBS estimates Apple will sell 58 million iPhones.
Assuming this potential iPhone shipment range proves reliable, this would mark only the third time Apple has ever sold more than 50 million iPhones in a quarter, and both of the prior occasions took place during holiday season quarters (Apple's FY Q1). Among other interesting observations, the survey also pegs iPhone demand in the current quarter at 55 million units, implying Apple still remains slightly supply constrained roughly six months after it first launched the iPhone 6 and 6 Plus.
An earnings beat ahead for Apple?
With the iPhone increasingly becoming the financial engine that powers Apple, what can this 54 million iPhone sales prediction tell us about Apple's upcoming earnings?
Here's how I'm choosing to look at it.
|
Q1 '15 |
Q2 '15 Est. | |
|---|---|---|
|
iPhone units |
74.5 million |
54 million |
|
iPhone ASP |
$687.30 |
$687.30 |
|
iPhone revenue |
$51.2 billion |
$37.1 billion |
|
Total revenue |
$74.6 billion |
$55.2 billion |
|
iPhone as a % of Total |
69% |
67% |
Source: Apple investor relations, Morgan Stanley, Yahoo! Finance.
To me, this implies that Apple appears on track to at least meet analysts' average estimates, again assuming that 54 million iPhone number proves reliable. The current business narrative at Apple hasn't fundamentally shifted in the months since Apple's homerun earnings report in January. Few thought it would, but it's certainly comforting to have a more concrete data point to actually support this viewpoint.
The shift toward the larger screen sizes of the iPhone 6 and 6 Plus has tilted the overall composition of Apple's sales base strongly in favor of the iPhone, which accounted for nearly 70% of Apple's total sales last quarter. On balance, this is a financial positive for Apple investors, as smartphones' refresh cycles tend to be shorter than tablets' -- carrier subsides cushion the upfront expense, making consumers more apt to upgrade more often.
Also, I want to note that this calculation assumes roughly the same sales mix between the iPhone 6 and the iPhone 6 Plus, as defined by average selling price or ASP number in the chart. That's probably a reasonable expectation, but one I wanted to make clear before moving along.
Still, only one number
To be sure, these types of Wall Street estimates can prove useful. However, they also have their limitations, and investors would do well to not grow overly fixated on these quarter-to-quarter figures.
At the Fool, we advocate a more long-term approach to investing for retirement, believing buying and holding quality companies for extended periods of time to be the more reliable way to realize one's financial goals. As such, the above 54 million iPhone shipments could prove accurate, but it might not as well. Either way, will a beat or a miss on this single data point derail the overall Apple investing thesis?
Absolutely not.
In today's 24/7 media world, maintaining focus on what truly matters for your investments can be daunting for the average Joe. So while these kinds of statistics and predictions can prove helpful in terms of interpreting the relative success of quarterly reports, remembering that Apple remains one of the most profitable and best run companies in the world should matter far more than any single data point for current or prospective Apple shareholders.
